India, with a slew of measures in the recent past, has moved an inch closer to its vision of creating a cash-less economy. However, today the debate in the Fin-tech world is not about a cash-less economy but about whether one should choose M-wallets or UPIs to transition into a digital banker. A mobile wallet is a substitute for your physical wallet that enables you to make transactions digitally from your smartphones. On the other hand, Unified Payment Interface (UPI) is a payment system that allows one to transfer money from one bank to another without requiring an intermediary like an M-wallet. As a result, several bankers and renowned Industry experts have predicted a not-so well future for M-wallets.

As the uncertainty regarding the future of M-wallets grows, Telecom companies have found an opportunity in digital payment services to enhance their relationship with customers. The key elements for winning this game are already things that Telecom companies have a natural tendency for – for example, a strong value proposition, access to large captive customer base, supply of infrastructure such as internet/smart phones, deregulated regulatory framework and the ability to leverage next gen technology services. India, with its 250 million smartphone users, 450 million active inter-net connections and 1100 million mobile subscribers, deserves to be a cash-less economy. Therefore, to better understand the growth of India’s digital payment’s system and the opportunities that lie ahead for the industry, I have divided the next section into pre-demonetization and post-demonetization periods.

Pre-demonetization

The pre-demonetization era was loaded with cash backs, deals and discounts which primarily played an important role in introducing the Indian consumers into the world of digital payments. Millions of new Indians, who were first time users, jumped into the bandwagon of digital payments, mostly to avail the discounts and deals. Convenience and ease was important but the key driver remained cash backs and discounts. Along with consumers, the industry players too competed hard to create the best experience for the users. Some succeeded at this, while others ended up disappointing the investors.

Another important innovation in the digital payment’s space was the Pre-Paid’ Instruments. The Pre-paid system too worked well for Indian Consumers who were willing to risk a small sum of money to be transferred into the mobile wallet and try various digital payment services. As a result, in the last 2 years, over 300 million mobile wallets were created. However, its impact has been more horizontal than vertical.We had more and more first time users in the country getting their first taste of digital payments. What has been missing in this phase has been depth of penetration and user loyalty as many first time users after availing of the cash back offers abandoned the services. However, things slightly changed in the months that followed the high-profile demonetization exercise by the Central Government on 08 November, 2017.

Post-demonetization

According to the latest Reserve Bank of India data, the total amount of cash in circulation fell from 17.97 lakh crore before 8 November, 2016 to 13.32 lakh crore, as of 30 March, 2017. Besides, the number of transactions under UPI has increased from 42 lakh in February to 49 lakh in March. This will see a further increase in the coming days boosted by Government’s initiatives like Lucky Grahak Yojana and Digi-Dhan Vyapar Yojana. Add to this, a recent report by the State Bank of India also revealed that the demonetisation exercise will play a pivotal role extinguishing about Rs 1.7 lakh crore worth cash from the system, thereby translating it into liquidity.

In the post-demonetization phase, telecom companies will have an increased role in attracting more and more customers to the digital payment space. The key difference between telecom players and M-wallets is that the former understands well that they are in digital payment system and not in the M-wallet space which would soon face an existential threat with the onslaught of UPI’s and other forms of digital payments. The biggest challenge with M-wallets is that one needs to pre-fund the mobile wallet by transferring money into it from your bank account. Therefore, the question is: Why should one transfer his/her money into the Mobile wallets where it does not earn any interest while it is parked there? On the other hand, Telecom players can link their existing mobile wallets with UPI and provide the customers seamless banking services which will be supported by high speed data.

For Telcos, Digital Payments is the next crucial step in consolidating relationship with customer and hence this will continue to be a focussed layer of engagement, in both online and offline modes. While on one hand their vast distribution network will continue to be leveraged for payments services in an offline-online mode, on the other hand digital payments will get more closely integrated with online properties in such a manner to provide a single unified experience to customer linking all engagements and accounts into a single user interface as a unified App. The mode of these digital payments today maybe use of pre=paid wallets, tomorrow these would evolve and mature into UPI enabled accounts providing as seamless as possible experience to customer as possible.

Telecom companies, with a large number of loyal customers, are definitely in a stronger position to support and contribute to the creation of digital India. With improved technology, better connectivity and timely customer care services in place, Telecom companies are now focusing their attention and resources on encouraging the customers to transact more digitally. The telecom industry is, therefore, seen at the centre of the digitization agenda of the Government. Be it smart cities, rural broadband, cash less economy or financial inclusion, everything now needs a telecom network to be carried to the masses which will now lay the foundation of a digitally connected India.

DISCLAIMER: The views expressed are solely of the author and ETTelecom.com does not necessarily subscribe to it. ETTelecom.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.

As the VP & National Business Head, LV Sastry is the CXO Profit Center Head, holding overall responsibility for the Mobile Banking & Commerce Business at Aircel and overseeing the conceptualization, strategy and execution of Aircels foray into mobile payments, digital payments and mobile commerce business.

As the VP & National Business Head, LV Sastry is the CXO Profit Center Head, holding overall responsibility for the Mobile Banking & Commerce Business at Aircel and overseeing the Show more.. conceptualization, strategy and execution of Aircels foray into mobile payments, digital payments and mobile commerce business.